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What Congress and the Supreme Court Say About Bankruptcy

So what do those who make up and protect the laws of bankruptcy say about the process? As a general development, the government has been trying to make the bankruptcy laws harder, so that people cannot easily get away from the debts they collect. The government would like individuals who are in financial trouble to try to work out new financial plans to work out their debts rather than file for bankruptcy.

At the start, the government had introduced bankruptcy laws as a way for industrious individuals who unfortunately were faced with out of control debts to be able to start afresh with their financial planning and management. However, over the past year it has become evident that there are many people who choose to use the bankruptcy laws in order to avoid their financial obligations. Keeping this adversity in mind, the government has decided to tighten the reins on the bankruptcy laws.

The changes made to the Bankruptcy Abuse Prevention and Consumer Protection Act will ensure that people will not be able to abuse the benefits of filing for bankruptcy. On the other hand, however, those who are in actuality faced with financial difficulties and need bankruptcy laws to protect them will find them it harder to file for bankruptcy.

Bankruptcy laws allow those who have filed for bankruptcy either exemption from or discharging of certain kinds of debts. For those who are involved in out of control debts, they would need a fresh start which is what the government intends to support. But at the same time, it is important that those who are out to take advantage of bankruptcy laws are sifted out in the process.

Congress drafted bankruptcy legislation towards relieving the hardworking individual from severe indebtedness and permitting such an individual to start a new life. When enacting the current bankruptcy laws Congress stated that the purpose of bankruptcy was to "permit complete settlement of the affairs of a bankrupt debtor, and a complete discharge and fresh start" (H.R.Rep. No.95-595). Even the Supreme Court noted in Kokoszka v. Belford, " ...the intent of Congress (was) to leave the (debtor) free" to accumulate new wealth in the future and thus make an unencumbered fresh start." In Wetmore v. Markoe, the court stated "systems of bankruptcy are designed to relieve the honest debtor front eh weight of indebtedness which has become oppressive and to permit him to have a fresh start in"life, freed from the obligations and responsibilities which may have resulted from...misfortunes." And in Grogan v. Garner ""a central purpose of the (bankruptcy) code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt." Bankruptcy gives the honest but unfortunate person a fresh start in life unhampered by the stress and weight of preexisting debt.

The two most important aspects of the fresh start are the exemption provisions and the discharge of debts. The Supreme Court stated that "exemptions were designed to permit individual debtors to retain exempt property so that they will be able to enjoy a fresh start after bankruptcy." (U.S. v. Security Indus. Bank). Exemptions allow the debtor to retain assets needed for a fresh start and to assure that the debtor will not become impoverished. The bankruptcy discharge essentially wipes the financial slate clean and allows the debtor to start afresh.

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